Back in 2004 a not-for-profit consumer advocacy organization called Test-Aankoop (Test-Purchase) filed a complaint with Belgium's Commercial Court charging that Herbalife violated aspects of their Market Practices Act. The court has finally ruled on the matter, saying Herbalife was unable to show a significant number of retail customers beyond their distributor base, thus "a consumer or a business stands to make money which is more likely the result of introducing new consumers or businesses into the scheme than from the sale or use of products."

Herbalife was also fined 5,000 euro ($6,550) for "each breach" that occurs two months after the date of the ruling (after mid-February).

Herbalife is challenging the ruling. The company currently has about 2.5 million distributors doing business in 79 countries.

Herbalife claims that in spite of Belgium only accounting for 0.65% of total revenue, they are confident they can show the decision is based on "factual errors" and "misinterpretations of the law", and are committed to the Belgium market. Herbalife's response to the charges can be found here:

If the court's ruling in this case sticks it will create a devastating legal precedent in Belgium that will all but outlaw M.L.M. in that country (making it the third such country - the bathwater soaked baby was also thrown out in China and Nepal).

Of course, a few of the higher profile anti-MLM critics are exploiting this decision, claiming this is what they've been trying to convince U.S. authorities of all along. That is, M.L.M. companies are all pyramid schemes because most of the product is purchased and consumed by the reps themselves, not by non-distributor retail customers. There are two things wrong with that. First, Belgium law, as it pertains to pyramid schemes, is not only much different than U.S. law, or any other country's laws for that matter, it is unreasonable and draconian. Here's a sample, taken directly from the court's decision:

Market Practices Act: Article 91, 14
"The following misleading business practices are under all circumstances considered to be dishonest: setting up, managing, promoting a pyramid scheme where the consumers have, upon payment, a chance to receive income from, either recruiting new consumers in the system or from the sale or the use of products."

A chance to receive income from the sale of the product! That makes it a pyramid scheme? Another section of the Act (Article 99) says the same thing. So if a distributor can't even make money by selling the product, it begs the question, why is any M.L.M. company even thinking about doing business in Belgium? But even if this is merely a misinterpretation of the law, and sales to end user customers are legitimizing, the Belgium courts have also declared distributors are not customers. Let's root for Herbalife to set the court straight.

There's good evidence that, in fact, the court has been mislead by the plaintiffs (who I suspect are themselves being mislead by certain anti-M.L.M. critics who make a living misleading plaintiffs, government agencies and courts about our industry). For example, Test-Aankoop ironically uses Amway's "70% Rule" as a measure of legitimacy, but then describes it as a requirement to sell 70% of one's inventory to non-distributor "end users". This is far removed from what Amway's "70% Rule" actually means. It simply restricts a rep from buying more inventory until at least 70% of all previous orders have been sold or consumed - to or by anyone. It's just a rule to prevent front loading and stockpiling of products, as most countries, including the U.S., completely understand.

So no, this action is not even remotely indicative of how the laws may be applied in the United States, or any other part of the world. In fact, most countries, and our own FTC, rightfully and fully recognize that distributors can be, and often are, customers. Let's do the thinking that the Belgium court obviously hasn't done. If someone is a regular customer of an M.L.M. product, because they actually like the product, wouldn't it make sense that they might want to sign up as a distributor to get the product at a lower price, and maybe make a few bucks by referring others to a product they're already inclined to recommend? Let's think some more. If you were looking to join an M.L.M. program wouldn't it make sense that you'd narrow down the several hundred choices to the few who have products you are actually interested in using? Perhaps even sampled and benefited from? Does it make any sense at all that you'd choose to become a distributor for a product that you haven't even tried, let alone tested and didn't like? I'm not suggesting some distributors don't make such nonsensical decisions. Some do. But the large majority don't. They choose to enroll as reps for, and get on autoship to buy, products they actually like and want! How is that not a customer?

Also, Test-Aankoop, and the court, key in on the fact that in Herbalife, like virtually all M.L.M. companies, a rep can make more money by enrolling other reps and building a downline sales organization than from their own product sales. But, doesn't this also describe virtually all companies! Doesn't Century21 make more money by recruiting more real estate agents? Doesn't Coca-Cola make more money by getting their product into more stores? When Ray Croc decided he could make more money by getting a bunch of other people to sell his hamburgers and taking a small cut of their sales than he could by selling his own hamburgers, his McDonalds Corporation become one of the most admired success stories in American history. But if an Herbalife distributor applies the identical strategy - I can make more money by getting others to sell Herbalife products and taking a small cut of their sales than I could by retailing my own Herbalife products - they become a "predatory" operation promoting an illegal scheme.

Well, at least in Belgium. At least for now.

Lenny is obviously confused at to how a customer should be defined. A customer / end user buys a product for personal use and not because it is required to participate in the pyramid pay scheme.

His comparison to franchises like McDlonald's is glaringly ignorant. Those that purchase a franchise have a restaurant that sells only to customers. They do not endlessly recruit other franchisees into the mix. Perhaps Lenny would like to give us the customer to franchisee ratio for McDonald's. I would bet there is more than a fraction of a customer or a handful of customers per franchisee.

Re: Herbalife

The most amusing part of this whole sordid saga is Clements rant about it:
Lenny is obviously confused at to how a customer should be defined. A customer / end user buys a product for personal use and not because it is required to participate in the pyramid pay scheme.

His comparison to franchises like McDlonald's is glaringly ignorant. Those that purchase a franchise have a restaurant that sells only to customers. They do not endlessly recruit other franchisees into the mix. Perhaps Lenny would like to give us the customer to franchisee ratio for McDonald's. I would bet there is more than a fraction of a customer or a handful of customers per franchisee.

Kudos to Belgium for chasing these MLM varmits out!

Soapboxmom

Thanks for this one SBM and I have personal information on it here in the US and they should be chased out of here.

I was 'down on my luck' in Selma, Alabama, and trying to get a job for person of my race and age was out of the question. Right now I cannot remember how I got 'hooked'. Perhaps an ad in local newspaper and I went for it. All they ever wanted was for me to buy more product and SELL, RECRUIT, SELL!! I sold some, I was a good sales person at one time. Then I went totally broke and wound up with about $400 of product that I could not GIVE AWAY!

They play on the vulnerable and believe me I was and guilible along with it. There are other reason for this but no need to go into that. I would NEVER advise anyone to get into this racket. Get you some good vitamins, eat right and exercise - don't listen to these con men.

Re: Herbalife

Originally Posted by scratchycat

They play on the vulnerable and believe me I was and guilible along with it. There are other reason for this but no need to go into that. I would NEVER advise anyone to get into this racket. Get you some good vitamins, eat right and exercise - don't listen to these con men.

Thanks for that, SC.

I just revived an old post at scam to piss off some Scamway jerk currently blowing about what a wonderful opportunity Scamway is.

Here's this one lady's insights - insert Herbalife or any other MLM and the same thing applies:

Originally Posted by unraveledpoet

Please, please DO NOT JOIN QUIXTAR (affiliated with the giant Amway MLM)

I am just here to warn anyone who is thinking of joining a MLM or pyramid scheme to NOT join Quixtar. My fiance started doing Quixtar.. he spent every second listening to motivational CD's, going to meetings, trying to "get" new people to join the Quixtar "team." He spent ridiculous amounts of money on products from Quixtar (energy drinks, vitamin supplements, etc..) that he would not have purchased had it been at a regular store. (Supposedly you make a profit from the things you buy online from yourself, but the profit is about 8%... so spending $300 on junk you wouldn't normally buy would give you less than $30. not worth it.)

He was spurred on by the promise of a better life- he would be able to stop working, spend more time with family (we have a 1-yr. old daughter), but the more you get into Quixtar, the MORE time you have to spend on it. He was brainwashed- I couldn't even talk to him anymore because he wouldn't listen and I felt like I was just talking to the CD's in his head. He completely changed his views on everything- he became a born-again Christian (which isn't bad in itself, but when you are compelled to do it because of Quixtar and the power of the masses, it's not for the right reason)...

We ultimately broke off the engagement because of Quixtar. It is such a powerful vehicle that has a force of the masses behind it. He put Quixtar before everything else in his life, and it was so hard to even tell him that because he kept saying he was doing it for us. That's what Quixtar made him think. He would come to his upline about personal and other problems instead of coming to me... It was really creepy. He became a different person.

I know this is a long post, but I just don't want anyone else to get hurt like I did. There were many nice, great people that were a part of Quixtar, just like John, but it doesn't matter if you think you are the most SKEPTICAL person... John was, and he got sucked in just the same.

I hope that this helps anyone who was thinking about joining Quixtar. I feel I need to tell my story so I can help others avoid this "business." It is a waste of your valuable time.

Re: Herbalife

I just revived an old post at scam to piss off some Scamway jerk currently blowing about what a wonderful opportunity Scamway is.

Here's this one lady's insights - insert Herbalife or any other MLM and the same thing applies:

You are so right Doc! It can be applied to all those MLMs. The guy I connected with pursued me ever where I went by phone - even to where I was employed and he was good!! He had me believing because I was wanting to believe I could make enough money to support myself. Well, I woke up finally and never talked to him again. He finally stopped calling. When people are desperate they are most vunerable and these people are trained to find that right spot to get to you. It is best to never let them give you the sales talk EVER!!

Remember Fuller Brush, vacuum cleaner salesmen, Shaklee, Sarah Coventry Jewelry, life time cookware, oh so many others... You might make a tiny bit of money but you are making the people at top very rich while you continue to buy the product. I got in that JerkyDirect thing for a few months at $7.99 per mo and never sold one bag other than what we consumed and we really did not like it, so that was cancelled. I suppose if we really liked it and were going to spend that much each month it would have been okay but we have local jerky companies that have much better stuff for less!!! All learning lessons we need to share with others.

Re: Herbalife

When I was much younger I was involved in cosmetic sales and I did really good because I liked and used the cosmetics but I also sold them to friends because they really worked and they were not so expensive. It was much like Avon back when Avon gave parties. After the price of gas went up I could no longer make any money by giving shows so I just gave it up and bought the product from a friend.

My experience with Herbalife was in 2001 and lasted only a few months (thank goodness!!). I got a job with a local hospital and worked there for a few months before I left Selma. I just wanted to share in order to help others. Now, I have my own website and sell products with my art designs. I don't sell much but get satisfaction out of being able to use my talents.

I am also thankful that I am now retired and don't have to seek employment. Those were tough years working 8 hrs. a day to earn enough to scrape by. Joy oh Joy, but they were fun also!!

Re: Herbalife

Originally Posted by scratchycat

When I was much younger I was involved in cosmetic sales and I did really good because I liked and used the cosmetics but I also sold them to friends because they really worked and they were not so expensive. It was much like Avon back when Avon gave parties. After the price of gas went up I could no longer make any money by giving shows so I just gave it up and bought the product from a friend.

My experience with Herbalife was in 2001 and lasted only a few months (thank goodness!!). I got a job with a local hospital and worked there for a few months before I left Selma. I just wanted to share in order to help others. Now, I have my own website and sell products with my art designs. I don't sell much but get satisfaction out of being able to use my talents.

I am also thankful that I am now retired and don't have to seek employment. Those were tough years working 8 hrs. a day to earn enough to scrape by. Joy oh Joy, but they were fun also!!

Another thing I want to add to this, in all the times that I tried these 'sales' jobs, I never 'recruited' one person. I was selling the product because I liked it and because I never made a lot of money there was no way I was going to try and bring someone else into the business unless they really wanted to sell the product. Things have really changed in 10-25 years when we were selling products and before there has been such an influx of internet online businesses. Most of these don't even sell a product, they just do reselling for things that are free online. Of course all those type of companies yell 'recruit' at you because that is the way to make the big money. It was just not in my character to do that so I didn't. I was sorry when Fashion 220 was bought out though because it was one of the best cosmetics I had ever found. Nothing these days compares with it.

I suppose if my little story gets picked up and shared it will just bring more awareness to others. As my original name here in RS was honestme, that is all I know how to be is honest and perhaps it will help others.

Re: Herbalife

Congratulations to Belgium for this ruling against Herbalife and let us all keep our fingers crossed that it is upheld on appeal. May it be the first of many judgements against these unscrupulous companies who are sellers of overpriced goods and cult like "motivation" practices designed to capture the naive in order to make money for the 3% at the top.

It is rare that the average MLM seller makes any meaningful money from retail sales after the first few months a new product is launched. After that the appalling quality /price ratio causes a high fall out rate, leaving the poor new "independent business operator" with, at best, a load of unshiftable product in their garage and divorced, friendless, penniless and worse at the other end of the scale. Most of us have sad stories about friends or family to tell on this topic.

It is amazing that these companies in the US still have so much influence on legislation in general and the FTC in particular. (or given the extraordinary power wielded by the corporations, perhaps it is not so suprising)

Re: Herbalife

LRM it does not look like much money for any of them but the ones doing the actual buying and selling are not even breaking even while the top earners count their dolllars. It is a shame people use good products to entice people to work for them claiming they really have their own business. In all actuality the products probably cost a fraction of what a buyer pays for them. A trip to your local health food store would be a better investment.

Last year in Facebook a close relative was asking about trying out this program as a way to make money from home. I strongly advised against it and I am sure she was disappointed but it is best to tell someone the truth about these 'opportunities' rather than let them sink precious money into something that is not going to work for them.

Re: Herbalife

This quote from Whitney Tilson is excellent reading and maybe legislators will finally take note of what many people have been saying for years

Pershing Square’s analysis of Herbalife is the most remarkable piece of investment analysis I have ever seen. Simply astonishing. And kudos to Pershing Square for making all of it public – not just the 300+ page slide presentation, but all the supporting materials. For the many young people on this email list who are looking for a job in this industry, study this carefully – if you can do analysis even a tiny fraction this comprehensive, there will always be a job for you…

Hopefully it results in massive reform of this whole sector, which has preyed upon MILLIONS of vulnerable people all over the world for decades. This has been blindingly obvious to anyone who’s done even cursory analysis, but for some reason regulators at the state and local level have done almost nothing to rein in the widespread abuses – it’s just like subprime mortgages and student lending. This is one area in which China is WAY ahead of us: it’s simply outlawed ALL multi-level marketing – a very good idea in my opinion…

Re: Herbalife

Its stock price went on a roller-coaster ride after two billionaire investors argued about the company -- and each other -- on live television.

Icahn vs. Ackman: Investors take squabble to TV

The names Bill Ackman or Carl Icahn may not ring a bell, but on Wall Street, they're legendary investor activists. On Friday, the two titans of finance revived a decade-old feud that went viral and raised big questions surrounding the weight loss supplement maker.

As the founder of Pershing Square Capital Management, Ackman controls about $12 billion in assets, and he has his sights set on Herbalife. Ackman said in one broadcast, "How is it possible that Herbalife sells six times more nutrition powder than Abbott Labs, Unilever, and GNC?"

The answer? Ackman says Herbalife is a pyramid scheme. He's so sure of it, he's shorting Herbalife stock and betting $1 billion it will plummet to zero.

When the hedge fund manager went on CNBC Friday, the share price dropped to its lowest point of the day. Ackman said, "We believe this is a company causing enormous harm to millions of people and has done so over a very long period of time."

But minutes later, the price soared when another activist investor, Carl Icahn -- who won't say whether he owns Herbalife stock -- called in and accused Ackman of trying to manipulate the markets.

Icahn said, "He got a bunch of innocent investors, retirees, they are going to lose their money so Ackman can show a good record at the end of the year."

At times, the insults turned very personal, as the two traded blows over Herbalife and a long-simmering feud -- a business deal that ended up in court, where Icahn lost.

Icahn said, "Ackman is a liar. ... The guy is a major loser."

Ackman said, "This is not an honest guy, and this is not a guy who keeps his word."

Brian S. Sozzi, NBG Productions chief equities analyst, said, "The issue seems to be dating back many many years, and maybe it was festering beneath the surface. There is serious bad blood."

Herbalife has called Ackman's allegations "a malicious attack on Herbalife's business model, based largely on outdated, distorted and inaccurate information."

But all that took a back seat as Wall Street was riveted by the theater of two powerful billionaires airing their grievances, laced with Icahn's expletives.

Sozzi said, "They are what I call 'market movers.' When these guys talk, as an analyst or an investor, you tend to listen."

CBS News' Rebecca Jarvis spoke with Ackman Sunday night. He called the exchange with Icahn on CNBC a sideshow. But said he doesn't regret it. He believes it brought attention to what he calls the fraud taking place at Herbalife. Herbalife has yet to respond to the exchange. We're certain to hear more from company executives by the Feb. 19 earnings call.

The Securities and Exchange Commission is now investigating Herbalife, but has not yet decided whether to take action.
Ackman has been and will continue to visit with federal and state regulators. He told CBS News he's compiling a list of questions for Herbalife. Herbalife says ask anything, and we'll answer it on the record. Ackman said he's planning to make those answers public.

Re: Herbalife

Over 25% of Distributors reach the rank of Supervisor and above (“Leader”), qualifying them for additional compensation which is paid by Herbalife based upon their activities and those they have sponsored directly and indirectly. The annual gross compensation paid by Herbalife to all Leaders during 2011 averaged $2,900 (with a median level of $741). Over 39% of Supervisors are “Active” (defined as those who generated at least 2,500 points of volume in 2011 after becoming Supervisor). The annual gross compensation paid by Herbalife to Active Leaders during 2011 averaged $7,354 (with a median level of $637).

Re: Herbalife

Herbalife stock falls 6% on report of law-enforcement investigation.

According to the Post, the FTC cited "pending law-enforcement action" and withheld some information the Post requested about Herbalife. The newspaper said the FTC released 729 pages of complaints against Herbalife.

Re: Herbalife

Originally Posted by kschang

Technically every low-level serf in a big corp is helping make the executives rich... so that in itself is not a sign of foul play.

So, are you saying pyramids fall into the "not a sign of foul play"? You don't have to take my OPINIONS as realistic, I only asked the question. However, it seems to me a lot of other people are asking a lot of questions about Herbalife.

Re: Herbalife

No, I'm saying "presence of low-level serfs making the cream of the crop rich" is not in itself 'sign of foul play'. Legitimate businesses can do that too. Jeff Bezos have thousands of Amazon serfs, for example.